Microfinance

Some years before the World Wide Web was a twinkle in Tim Berner-Lee's eye, the power of modern communications bought harrowing images of poverty and starvation in Africa into our living rooms, somehow emphasising what a small place the world had become. This stimulated urgent appeals from Oxfam, Band Aid, Live Aid etc. Backed by popstars and the power of television these became runaway successes and raised large sums of money in relatively short spaces of time. Faced with the competing claims of mortgages and other living costs one did one's best to respond. This was a 'fire brigade' action to alleviate an emergency and no alternative solutions were available; but I am sure we all felt the disconnect between giver and receiver and wondered how much of our donation would get to the intended recipients. Which one of us who watched the reports from Ethiopia would not have preferred, had it been possible, to have immediately passed the contents of our larders through the television screen directly into the laps of the starving.

Then in 1990 came the World Wide Web and, over the ensuing years, the explosion in communications it made possible.

In 2004 Matt Flannery and Jessica Jackley witnessed the power of microfinance firsthand while visiting East Africa - Jessica working for the Village Enterprise Fund and Matt filming interviews with small business entrepreneurs - they were able to see and hear first hand how small grants of only $100 - $150 had been used to build small successful businesses which could then support a family. Microfinance is about giving poor people a ‘hand up’, not a ‘hand out’ by providing them with expanded cheap access to financial services. It recognises that people, whatever their situation, are well equipped to help themselves once they have the necessary starting capital, the 'seed-corn', so to speak, of their enterprise.

Matt and Jessica returned from Africa determined to use the internet to expand the flow of funds to microfinance institutions. Their aim was to to make it possible for donors from anywhere in the world to select the individuals, groups or small businesses they wished to help and to then follow their progress. In October 2005 the first peer-to-peer microlending website "Kiva" was announced to the world. ("Kiva" being a happy choice from Swahili embodying the meanings of "agreement" and "unity") Shortly afterwards the US weblog Daily Kos discovered Kiva and broadcast the website to hundreds of thousands of its readers. The word was out... and the rest is history.

Anyone with a paypal account and internet access can donate through Kiva and millions in the developed world have already shown they are very willing to afford at least the minimum amount of $25. The individual donor chooses an entrepreneur according to gender, sector or region and their donation is then pooled with others and passed on as a repayable loan. The only element of charity in the transaction is the loss of interest suffered by the donor which, of course, as rates stand at present, is negligible. The lender is kept posted at regular intervals of the progress of the chosen business, and when the load is repaid at a previously agreed date the donor can choose whether to retain it, relend it, or donate it to Kiva.

A further interesting feature of Kiva is that one can choose to lend as part of team self-selected by a common interest or other grouping. All sums lent by each member of the team, irrespective of its destination, adds to that team's total, thus introducing a minor element of competition. There are thousands of teams to choose from or one can start one's own.

Since its birth Kiva has grown from a small personal project to one of the world's largest microfinance facilitators, connecting entrepreneurs with millions of dollars in loans from hundreds of thousands of lenders around the world. The top lending team with, at the time of writing, $429,425 to its credit, is called the "Atheists, Agnostics, Skeptics, Freethinkers, Secular Humanists and the Non-Religious". It would be good to keep them top. Their next "Loan-a-Thon" Day is on July 1st. and the team have set a target of loaning $1,000,000 before the end of 2009.